State Secretary Investigation Reveals $3M in Waste, Possible Fraud in Oregon Preschool Program

Oregon Preschool Promise Program Faces Scrutiny Over Millions in Waste and Improper Payments

A recent investigation by the Secretary of State's Office has uncovered significant issues within Oregon’s Preschool Promise program, including $1.4 million in waste and $1.5 million in improper payments to grantees. The findings have raised concerns about how public funds are being allocated and whether they are being used effectively to support children in need.

The probe was initiated by a concerned citizen from Beaverton, Jeff Myers, who has been instrumental in bringing attention to these issues. Myers expressed his frustration with the mismanagement of funds, stating that the money should be going directly to help children in lower-income families. “These are meant for lower income families to get childcare and preschool for their kids, and to see the level of waste and the millions of dollars that went to nowhere, to serve no children, is just upsetting,” he said during an interview.

The Secretary of State's management letter, which outlines the results of the audit, examined grants awarded between 2021 and 2024. It excluded the 2020 school year due to pandemic-related disruptions. The report highlighted several troubling patterns, including money given to preschools that were chronically under-enrolled or had never opened at all. Some preschools also received additional funding to expand their capacity despite ongoing enrollment issues.

This issue was previously brought to light through a series of investigations by KATU News. In October 2022, KATU found that the Division of Early Learning and Care (now the Department of Early Learning and Care) had spent approximately $26 million on Preschool Promise seats that remained unfilled. The findings were based on documents obtained through public records requests, which showed discrepancies between the number of seats promised and those actually filled.

Despite these findings, the agency initially blamed the under-enrollment on the pandemic and opted not to reclaim the funds. However, subsequent investigations revealed that the problem persisted even after the pandemic. A follow-up report in March 2023 found that the agency continued to spend millions on unfilled seats. During an interview with KATU, Director Alyssa Chatterjee acknowledged the issue but maintained that the pandemic was a factor.

The latest audit report indicates that the agency’s goals aim for 100% enrollment, but its regulations only allow for the termination or reduction of grants if enrollment falls below 80%. As of late 2023, 18% of sites had low enrollment, with over $679,000 in payments that should not have gone to providers with chronic under-enrollment.

Auditors also identified $1.5 million in improper payments, which could have been fraudulent due to inadequate oversight. While the report did not confirm fraud, it pointed out inconsistencies in expense reporting and a lack of standardized procedures for submitting reports. Some grantees submitted reports monthly, while others did so annually, making it difficult to detect potential misuse of funds.

One notable example involved a grantee that reported payroll taxes at an unusually high rate, suggesting possible misreporting. Auditors also noted instances of rounded numbers and increased expenses toward the end of grant cycles, which could indicate attempts to maximize reimbursement amounts.

Another concern raised in the report was the use of "braided funding," where preschools rely on multiple sources of funding, such as federal programs and state initiatives. While this model is recommended, it poses risks of double-dipping, where a single provider may receive multiple forms of support. The report urged the Department of Early Learning and Care to implement measures to prevent this.

Additionally, auditors discovered that 53 providers had received both American Rescue Plan Act funding and Paycheck Protection Program (PPP) loans, raising questions about potential conflicts. Although the audit did not investigate whether these providers had double-dipped, it forwarded the information to federal authorities for further review.

Secretary of State Tobias Read praised citizens like Myers for bringing these issues to light and emphasized the importance of ensuring that public funds are used appropriately. He stated that the goal is to protect Oregon’s children and ensure that parents can access affordable, quality preschool options.

The agency has yet to provide a detailed response to the audit recommendations but has indicated that it is working on addressing the concerns raised. The findings underscore the need for greater accountability and transparency in the Preschool Promise program to ensure that taxpayer dollars are used effectively to support Oregon’s youngest learners.